Why the Foreclosure Crisis is Still Stalling Economic Recovery

If you’re like me you’ve been slammed by the recent information overload about our struggling economy and the best way to get it moving again. We know more about the debt ceiling today than we ever knew before, like during the Bush Administration, when it was raised seven times with little fanfare.

But this year’s debate was played out on national TV, in print and online because of our constant 24-hour news cycle. Before they finally compromised, these confusing negotiations were carried out in public as both sides worked to make points with the voters for 2012.

Then, of course, came the slight downgrade of U.S. credit by Standard and Poor’s, which sent the Stock market on a rollercoaster ride, reminiscent of the James Brown’s classic line, “Sometimes I’m Up, Sometimes I’m Down.”

Again the 24-hour news makes it seem like the economy is on the verge of collapse, then it’s not, then it is, then it might be! It’s a combination of overreaction and trying to analyze something instantly, when it needs to be observed over a period of time.

Everyone keeps saying we need to jump start the economy by creating jobs and the critics want to blame the entire unemployment problem on the Obama administration. But this economic mess was set in place in mid-2008 when the housing market collapsed.

Millions of Americans lost their homes to foreclosure, and the mortgage industry went belly up because of bad loans. Thousands of housing related construction jobs disappeared and they’re still gone today. Housing construction remains stalled because of the huge inventory of foreclosed houses, sitting empty and pulling down home values.

The problem is the banks were both greedy and hasty in their approach to foreclosure. As the banks rushed to put people out of their homes, they cut corners in processing the paperwork by forging signatures on important documents. In fact a Georgia-based company in Alpharetta, called Docx, played a big role in these so called "robo-signings" on mortgage papers.

Meanwhile you have to wonder what would have happened if the banks had tried harder to keep people in their homes, by rewriting the mortgages and modifying the payment plans back in 2008. 

So the next time you wonder why unemployment is so high, you’ll find part of the answer in that empty, foreclosed house in your neighborhood, that you pass by every day. Here’s the link to the 60 Minutes news story about the foreclosure problem and the paperwork mess that’s slowing the recovery of the housing market: http://www.cbsnews.com/stories/2011/08/07/60minutes/main20086862.shtml?tag=strip